Disturbing Study Highlights Racism

Do prospective customers behave differently based on sellers’ perceptible race or signals about sellers’ socioeconomic class? Does the answer to this question depend on whether a customer lives in an area that is racially segregated or plagued by property crime? We investigate these questions in a year-long experiment in which we sold iPods through local online classified advertisements throughout the United States. Each ad features a photograph of the product being held by a hand that is dark-skinned (“black”), light-skinned (“white”), or light-skinned with a wrist tattoo (traditionally associated with lower social class). We find that black sellers do worse than white sellers on a variety of metrics: they receive 13% fewer responses to their advertisements and receive 17% fewer offers. These effects are similar in magnitude to those associated with the display of a wrist tattoo. Conditional on receiving at least one offer, black sellers receive offers that are lower by 2 to 4%, despite the self-selected — and presumably less biased — pool of buyers. In addition, buyers corresponding with a black seller behave in ways that suggest they trust the seller less: they are 17% less likely to include their name in e-mails, 44% less likely to accept delivery by mail, and 56% more likely to express concern about making a long-distance payment. We find that black sellers suffer particularly poor outcomes in thin markets; it appears that discrimination may not “survive” in the presence of significant competition among buyers. Furthermore, black sellers do worst in markets that are racially segregated and that have high property crime rates. The latter result suggests that at least part of the explanation is statistical discrimination — that is, buyers being concerned about the time and potential danger involved in the transaction, or that the iPod is stolen goods.